Australia's fiscal crisis: The high court's erosion of state autonomy

Abstract

In drafting the Constitution, the Framers were conscious about the need to maintain the division of powers between the central government and the regions (which later became known as States) so that each level of government would be equal to one another. Australia has since seen a gradual erosion of State autonomy as a result of a series of unsatisfactory decisions of the High Court. The erosion of State legislative and financial powers began when Isaacs and Higgins JJ were appointed to the High Court in 1906. Following this, the High Court has demonstrated a willingness to interpret Commonwealth powers broadly, at the expense of the States. This expansive, literalist approach to interpreting the Constitution enunciated in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (‘Engineers’) (1920) was later used to expand the Commonwealth’s financial power in the cases of South Australia v Commonwealth (‘First Uniform Tax Case’) (1942), Victoria v Commonwealth (‘Second Uniform Tax Case’) (1971) and Ha v New South Wales (1997). The culmination of these decisions effectively precluded the States from levying income tax, and rendered all State franchise fees on petroleum, tobacco and alcohol constitutionally invalid. This thesis will illustrate the fundamental decisions in the centralisation of Commonwealth legislative and financial powers. In doing so, it will argue that the High Court has failed in its duty to protect the Constitution, and instead has allowed the Commonwealth to increase its powers, thus undermining Australian federalism. This thesis will conclude by examining Australia’s current financial situation, and will propose specific solutions to restore Australia’s fiscal federal balance to the framework that was envisioned by the Framers in 1890.